China Stocks Rally But Still Set for Worst Fall in Six Years

 

China stocks bounced back from two-year lows on Wednesday over hopes Beijing might relax its crippling zero-Covid strategy but the country’s markets are still looking at their biggest monthly drop in six years.

This week’s downbeat mood was lifted by hopes that the country would prioritise economic growth and fine-tune its draconian anti-virus policies.

That came after the official People’s Daily reiterated its “zero tolerance policy” in the fight against Covid but added its goal is “to eliminate outbreaks” rather than the virus.

The authorities in the capital Beijing are racing to get ahead of a Covid outbreak and avert Shanghai-style lockdowns.

 

Also on AF: Ebbing Covid Wave Slows Decline in Hong Kong Home Prices

 

Sentiment was also lifted by data showing profits at China’s industrial firms grew at a faster pace in March from a year earlier, and signs that the yuan is stabilising following its slump recently.

The blue-chip CSI300 index jumped 2.9% to 3,895.54, but that only came after it touched its lowest point since April 2020 in morning trade and it is still set for a 10% fall this month.

China’s tech-focused STAR Market and start-up board ChiNext rebounded 4.4%, and 5.1%, respectively.

The Shanghai Composite Index rose 2.49%, or 71.86 points, to 2,958.28, while the Shenzhen Composite Index on China’s second exchange gained 3.94%, or 69.11 points, to 1,821.39.

Hong Kong stocks ended flat and the Hang Seng Index added 0.06%, or 11.65 points, to reach 19,946.36. The Hang Seng Tech Index rose 1.7%, while the industrial sector gained 2.7%.

 

Tokyo Trails Wall Street Rout

Most Asian markets tracked Wall Street down. Tokyo, Sydney, Seoul, Singapore, Wellington, Taipei, Manila, Bangkok, Mumbai and Jakarta were all well down.

Tokyo shares closed lower, extending a rout on Wall Street where fears grew over the global economic slowdown.

The Nikkei 225 index, which dipped more than 2% in the morning, ended down 1.17% or 313.48 points to end at 26,386.63, while the broader Topix index fell 0.94%, or 17.75 points, to 1,860.76.

Indian stocks fell with Mumbai’s signature Nifty 50 index down 0.94%, or 162.40 points, to close at 17,038.40.

Australian shares lost 0.78% as inflation hit a 20-year high, bringing interest rate rises closer.

 

Euro Sinks to 2017 Low

Elsewhere across the globe, the euro dropped to its weakest since 2017 as investors worried about the growth and inflation snapped up dollars.

The dollar has roared 4.3% higher in April and is on course for its best month since January 2015, propelled by mounting expectations for the Federal Reserve to hike interest rates aggressively in coming months and the US economy to hold up better than the euro zone.

European stocks fell too, although the drops were not as sharp as on Wall Street where the tech-heavy Nasdaq 100 closed down 3.3% at its lowest level since late 2020.

News that Russia had cut gas supplies to Poland and Bulgaria deepened worries, sending the MSCI world equity index slumping to a 13-month low.

A mixed set of corporate earnings, including Google parent Alphabet reporting its first quarterly revenue miss of the pandemic, also weighed on investor sentiment.

 

Key figures at 0810 GMT

Tokyo – Nikkei 225: DOWN 1.2% at 26,386.63 (close)

Hong Kong – Hang Seng Index: UP 0.1% at 19,946.36 (close)

Shanghai – Composite > UP 2.5% at 2,958.28 (close)

London – FTSE 100 > UP 0.3% at 7,405.75

Brent North Sea crude > UP 0.2% at $105.20 per barrel

West Texas Intermediate > UP 0.1% at $101.82 per barrel

New York – Dow > DOWN 2.4% at 33,240.18 (Tuesday close)

 

  • Reuters with additional editing by Sean O’Meara

 

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Sean OMeara

Sean O’Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.